BG Group
is starting to right its ship. But the U.K. oil and gas company isn’t yet steaming in the right direction.

BG said late Tuesday it would sell the pipeline network associated with its liquefied natural gas project in Queensland to an Australian gas infrastructure company for $5 billion, more than expected and far higher than the asset’s book value of $1.6 billion. This is good news for investors, who have been battered by repeated profit warnings over the past two years while waiting for BG’s large projects in Brazil and Australia to come to fruition.

The deal should mean about $4.3 billion of cash in the door, net of tax and other costs, reckons BMO Capital Markets. That is significant: The deal will help reduce BG’s net debt, estimated at about $14 billion, and fund investment spending, which could be about $8 billion to $10 billion next year.

There was a sting in the tail, though: BG took a $2 billion noncash impairment on its remaining Queensland assets. There could be more to come. BG’s last reference price for oil was $100 a barrel; Brent now trades at about $65. Reassessing could mean more write-downs, given lower expected cash flows on oil price-linked LNG contracts.

BG is going into a crunch period. Output from Brazil is increasing and BG has pledged first LNG production from Queensland this month. If all goes well, BG may finally deliver on growth, the promise of which once earned it a hefty valuation premium to the oil and gas sector. BMO estimates its production will grow at 10% annually from 2013 to 2017.

Recent disappointments mean there is still reason to be wary. The path from first LNG to full production is an unpredictable one, especially for an untested coal-seam gas project that will involve drilling 2,000 wells to feed the export terminal.
Credit Suisse
argues the timing of the plant’s commercial startup, when BG takes formal operatorship and starts shipping under contracts, has already slipped, while ramp-up could fall behind again next year.

Any delays would, understandably, get short shrift. Meanwhile, new chief executiveHelge Lund, who joins in March, won’t lay out his strategy until well into 2015, shaping BG’s plans beyond Brazil and Australia.

BG’s pipeline sale should help it steer clear of some trouble. Investors should still wait before climbing aboard.